Lokesh Kumar asked:




How important is a home mortgage loan pre-approval? The short is “very important” but read further before getting your hopes too high only to be disappointed later. What does it mean to be pre-qualified and to be pre-approved for a house loan? Read further to find out more.

It helps to be ready if you’re in a competitive market. If you are lucky enough to be pre-approved for a home loan, it can give you an edge over other buyers who may be interested in the same home or condo who perhaps aren’t financially stable. If you do therefore take the large step of being pre-approved for a mortgage loan, it’s an indication to the home owner that you are serious about buying his / her home and not just bargaining to find a steal!

What you need to do to get a pre-approval for a Mortgage Loan?

First step is an honest evaluation of your financial situation. Add up a list of all your assets comprising your cash, stocks, mutual funds, bonds, savings, IRAs, and any other investment and then deduct all the loans and payments that you have to make. This amount will indicate what kind of house you can afford.

Remember – there are additional expenses while buying a house. This will give you a realistic picture of just how much you can comfortably borrow and how much you will qualify to borrow. It is possible to borrow an amount that will cover the all the insurance and taxes of the first year.

Once you know how much mortgage loan you can afford, you can approach a lender or apply for a home loan online. Many online mortgage loan sites offer quotes from at least 5 lenders. Online mortgage loans are popular because the lender contacts you based on the information given by you. That makes it easier for you narrow down the lenders who are interested in working with you. Also, online application is good for busy people.

What is Difference Between being Pre-qualified and Being Pre-approved for Loan?

Pre-qualified means you contact a mortgage lender and give him/ her, your details in person or on the phone and then he/ she creates a file credit report based on details given by him. This information is usually not verified. You will get a letter stating that you are pre-qualified.

Pre-approved means a commitment from a mortgage lender once you have filled out an application for a home mortgage loan and your details have been verified. These details will include credit report from the three largest credit reporting agencies – Equifax, Experian and Trans Union Corp. Most online applications go through this pre-approval process.

If your credit score is low that does not necessarily mean you will not be pre-approved for a home loan. Some lenders ask for additional details like your salary statement, bank statements, W2 etc. Also, a willing lender will ask questions about the reasons why the credit score is low and why there collection records in your credit report. If the credit score is low but if you still confident that you can buy a house, then you can answer these questions.

This may be a little too much questioning but at least the lender is willing to work with you even though your credit score is low instead of just rejecting your home mortgage loan pre-approval application! Most lenders have knowledge of how to improve your credit score and may give you some tips to increase your score.

To be pre-approved gives you an edge when shopping for a home. You learn to identify the price range in which you’re looking to buy a home. This makes it easier for a home seller to accept or reject your offer if you’re bidding over a non pre-approved buyer. You must also familiarize yourself with a comfortable monthly loan installment.

Being pre-approved puts you in a better position as serious buyer and your negotiations maybe considered more seriously than other potential buyer who is not pre-approved for a home mortgage. Usually the pre-approval letter has an expiry date. A lot of times the expiry date for the pre-approval letter could be 3 months.

In conclusion, it is best to be pre-approved rather than pre-qualified for a mortgage loan. Be realistic about the amount of home loan you can afford. It is better to live a little below your means than to borrow more than you can afford. There are additional expenses involved while buying a home so you need to factor that into your house loan. So, be prepared when you apply for home mortgage loan pre-approval.

Jessica

Gail Anderson-Metcalf asked:




The price of houses keeps rising across the US. Since most require a down payment that is more than a renter can afford, how do you become a home owner when you don’t have the savings to cover the down payment? The answer is a home mortgage to purchase your house.

A home mortgage is different from a home loan. A mortgage is a contact that is required for you to obtain a loan from a banking institution or lending company. The actual loan is the money the lender provides.

In recent years, the types of home mortgages available to the public have increased dramatically. I remember purchasing my first home when most loans required a twenty percent down payment. Today, loan terms and the rate status are different with home mortgages and is applied depending on the financial situation at the time of the loan. Some home mortgages offer better terms when the interest rates are low and others rise with high home mortgage rates.

With a fixed rate home mortgage, the interest rate remains the same for the duration of the loan. Therefore, your monthly payment remains the same, even when interest rates rise. This type of home mortgage usually extends for a term of 15 or 30 years.

The amortization period for 30-year fixed rate home mortgages is longer and the monthly payments are lower. Although you can borrow money on a long-term basis, it comes with a high interest bill and builds equity very slowly.

With a 15-year fixed rate home mortgage, the amortization period is shorter allowing equity to build quickly with interest bills much lower. Expect to pay higher monthly payments with this type of home mortgage loan period.

Adjustable rate home mortgages have lower interest rates. Keep in mind, this low interest rate is only for a short time. Usually after the first year, the new interest rate will rise or fall, depending on the movement of the lending company’s prime rate.

If you’re considering an adjustable rate home mortgage, make sure the interest rate is low enough to be an advantage. Your monthly payment will remain low when the interest rate is low, but when interest rates rise, you may be left with a monthly payment you are unable or unwilling to pay.

Once you’re in the home of your desire, your property begins to accumulate equity with the rise in home prices. If you find yourself in need of quick cash, you can always take out the equity with a home equity loan. The home mortgage rates for home equity loans have always been thought to be higher than the home mortgage rates of other loan types. If you plan to stay in the home for many years, this may be a good option for you, otherwise don’t sacrifice the equity unless you absolutely must.

Once you understand the types of home mortgages that are available, you will need to decide what you must have in your new home and what you consider as an “extra.” You’ll want to find the best interest rate, but you’ll also find that homes in your price range may not include everything you want. So be prepared to negotiate and willing to sacrifice if you find a great deal. Once you’re in your home, you can always upgrade in a few years, using the equity you’ve built up in your property.

Karl

Max Hunter asked:


You have undoubtedly heard a plethora of advice when you mentioned you were considering buying a home. Everyone probably had an opinion, they always do. Some very well intended people probably gave you the worst advice you could possibly have received but you would have know way of knowing that.

Let us dispel some of the most common myths about home buying and loan selection. First and foremost the myth that the only type of mortgage to ever consider is a 30 year fixed rate mortgage. Perhaps when your parents or grandparents first considered buying a home this was true. The simple fact of the matter is that there are many loan packages available to buyers with all different financial circumstances and needs. For many a fixed-rate mortgage will be the right way to go. For others adjustable rate mortgages will make the most sense based on their financial situation. Your loan officer will be able to explain the differences between them and discuss which will make the best sense for you and your unique circumstances.

Another popular myth is that you should have a home in mind before you contact a mortgage professional. This is probably, however, the worst time to contact a mortgage professional. It is always best to start your home search only after you have spoken to a mortgage professional who can put a scope on your search for you before you fall in love with a home that is well beyond your financial means. A mortgage professional can save you hours of heartache when you try to compare a house within your means to those houses a realtor showed you but you simply cannot afford.

The only place you want to apply for your mortgage is with your personal bank. Or, at least that is what you will be told. Again, that may have been true about forty years ago, it is not necessarily true any longer. The mortgage market is competitive and there are many lenders that specialize in precisely this industry and are not retail banks. You may not want to close the door to the prospect of using one of these lenders because they very often offer the best loan packages.

Online mortgage lenders are risky. That is what traditionalists will say. Though you should be careful in selecting an online lender, there are many safe and reliable retailers. You will want to make sure that they have an encrypted, safe site that you can comfortable input your information. Very often these lenders are actually a network of lenders that combined can offer you the most possible loan packages to choose from. It is important to know that the site is encrypted and safe before you input your personal information. Most sites will have information on the site regarding the measures they take to protect your information.

If your credit is not great you will never get approved for a mortgage is what you have probably heard time and time again. There is an entire, tremendous industry that has been created to provide mortgages to people with poor credit or no credit history at all. Rather than have your friends and family deny the loan that you had not even applied for yet, speak to a mortgage professional who has the means to open the door to this entire world of lenders waiting for people with little, no or bad credit.

If you do not have a big enough down-payment your mortgage payments will be huge and you will have to pay PMI. Again, this is simply not true. There are countless mortgage packages available to people with little or no down-payment, including many packages that combine loans in order to prevent your having to pay PMI (private mortgage insurance).

The home loan industry is a vast industry that grows annually. The key to your success in maneuvering in the industry is to speak to mortgage professionals rather than well-intended but ill-informed family and friends. Though your family and friends may offer good advice, very often they just proffer myths that have long ago been busted. We have addressed but a small number of these myths in this article, there are countless. The best thing to do is get the information directly from the source- a mortgage professional rather than the people around you who may have misinformed you when they heard you are thinking of buying a home.



BILLIE